Up until now, the electricity market in the Nordic countries has been able to operate as an “energy-only" market. Generators only receive revenue if they produce and sell electricity. Internationally, there are examples of markets in which some or all generators explicitly receive revenue both for the electricity they sell and the capacity they make available to the system through some form of "capacity mechanism". However, since most electricity markets are still relatively young, the overall experience with generation investment and capacity adequacy policies is limited.

The question remains open as to whether it will be possible for the Nordic countries to continue operating an energy-only market with increasing amounts of intermittent generation. Nevertheless, the purpose of this project is not to establish whether or not the electricity market of the Nordic countries will have to become a "energy and capacity" market. We have identified a major problem when discussing the need to have flexible generation to meet demand when the wind isn't blowing: people have very different perceptions of what a market model with capacity markets would look like.

The project's objective is therefore to design and describe what a market model including a capacity market for the North European electricity market would look like, if the politicians decide that such model is desirable.

Project seminar

On behalf of the project group, EnBW organized a seminar in Berlin on April 8th, 2011 to present research results and to give a general overview of the current state of the debate on capacity markets. Presentations from the seminar are available below:

Introduction: The Market Design research program. Current efforts to design a target model for an European wholesale market.
Peter Fritz, Market Design
Capacity mechanisms - Policy instruments for influencing investment. An overview.
Niclas Damsgaard, SWECO
Country perspectives:

USA: PJM
Niclas Damsgaard, SWECO
Germany
Roland Meyer, Bremer Energie Institut
Sweden: Design and management of the Swedish strategic reserve
Peter Fritz, SWECO

Electricity Market Reform in the UK
Richard Green, University of Birmingham
EURELECTRIC's analysis on capacity remuneration mechanisms – preliminary findings
Marcel Cailliau, Chairman, EURELECTRIC Task Force Market Design for RES integration.
A Raw Model for a North European capacity Market – Presentation and discussions
The Market Design research team

Reference group:

Jan Andera, E.ON
Magnus Thorstensson, Svensk Energi
Pekka Vile, Fortum
Christina Simon, Svenska Kraftnät
Jan Sundell, Vattenfall
Jörg Jasper, EnBW
Håkan Östberg, Energy Markets Inspectorate